(This is the second half of the earlier post on Taleb cut and reposted here so as to be more readable)

As  I wrote in my earlier post, I agree with everything in Taleb’s list of “black swan proofing” the economy, except two points:

As I see it,

(1) This financial crisis had NOTHING to do with Black Swans (and Taleb himself says so elsewhere, so this piece confuses me).

(2) Nationalization (which he seems to be supporting here…and it may be he has a different understanding of what is involved)  is not the the right response, in my opinion.

A Black Swan refers to an unpredictable event. The financial crisis was predicted repeatedly, was completely foreseeable, and was indeed foreseen by Austrian theorists in writings throughout this century. 

The financial industry spin doctors (I’m not including Taleb in this group – but I think his writing may be put to that use) have been working overtime to associate this mess with the notion of “black swans,” hence the centrality given to accounts of the blow-up by industry insiders, who have acted as if it were something unforeseeable (Greenspan and others – I’ll find the links).

Why?

Saving face could be one reason. But considering the level of corruption and malfeasance that we’ve seen so far, it’s more likely that the angle is being worked as a diversion  from the obvious fact that the whole business seems at least partly engineered.

Equally important: by emphasizing the “unknown risk” angle, the industry also makes more control, regulation and centralization the natural option.

Do you see that?

Taleb is right about risk and Black Swans otherwise.

He’s a very smart guy and he certainly warned a lot about unknown risks and the foolishness of conventional wisdom.But he didn’t give the kind of detailed specific step-by-step account that Austrian economists, journalists, and theorists have done, not just in the last two years but for decades, predicting what would happen once the country went off the gold standard.

My own suspicions about Fannie and Freddie had nothing to do with risk or financial models. They arose from the clear and widespread evidence of fraud oozing in every direction from Goldman Sachs and the rest of the banking cartel, with Fannie and Freddie at the center. It didn’t need rocket science to see that. Just common sense and  the ability to see through jive talk. “Don’t dazzle me with bull shit,” as an acquaintance of mine used to say, making up for any lack of metaphoric aptness with dead-on accuracy about human nature.

I’m not knocking Taleb whom I greatly admire. I’m knocking what’s being pushed through his writing.

As I said in an earlier blog post, the whole establishment is for nationalization. The same fellows who drove the bus that just wrecked itself.

Why listen to them?

Stick your fingers into your ears – NO NATIONALIZATION

This is not about ideology. It’s about transparency.

Nationalization in a small, incorrupt, transparent state of Vermonters is one thing.

Nationalization in the American empire, circa 2009, is another. It’s cover for a power grab. The reason it’s being pushed so hurriedly is because something is unraveling and a few too many people are catching on.

Don’t take my word for it.

Ask yourself why one of the savviest investors, Warren Buffett, thinks that the banking industry is on the verge of tremendous profitability.

Buffett has a stake in the banks, of course. But is what he’s saying entirely about chatting up his investment?

Ask yourself why Nouriel Rubini first advocated nationalization as though it were diametrically opposed to the position (private-public partnership) held by Larry Summers and Tim Geithner.

Ask why he didn’t let the public know he was in business with Summers .

Ask why it is that since that business connection was revealed,  Roubini has now started saying that “nationalization” can proceed even with “private-public partnership”?

[Note: Roubini’s warning about the economic crash, made in September, 2006 to the IMF doesn’t seem to be available on the IMF site and any links I found on the web didn’t work. The closest I got to the actual speech was a reference at the IMF website in September 2007 to the 2006 speech.

Here’s an extended bio of Rubini at the IMF site that mentions the 2006 speech, but again there are no links.

Rubini’s own site has a link to his September 2007 speech which warns of a hard landing but no 2006 link.

On wiki, as well, there are no links to any 2006 predictions although there is a NY Times interview with Roubini from Sept. 2006 about the housing bubble, where he anticipates a housing bubble burst, with prices down 5-10% in a year in New York and perhaps 20-30% nationally. Honestly, in September 2006, everyone was saying that. Yours truly is on record calling the peak of the housing bubble in July 2005, as you can check from this website. And was much more detailed about it too. And I’m not an economist in the heart of the global financial order like Roubini.

Bottom line, except for this 2006 piece, which is very narrow in scope, limited to the housing bubble and quite modest in its predictions, there really is no other prediction of apocalypse I could find from2006 that would qualify Roubini for the title Dr. Doom, a title that more appropriately belongs to the Asia-based fund manager and commodities guru, Marc Faber, who is an Austrian and who was far more prescient and detailed in his warnings. Again, you have to wonder if the “Doom” moniker wasn’t intentionally applied to Roubini to coopt the libertarian Faber’s argument into the statist Roubini’s policy prescriptions.

Roubini’s cv also rings some alarm bells for me. His thesis adviser was Jeffrey Sachs and Roubini still admires him the most of all his colleagues; he’s worked closely with Larry Summers; he’s been on Clinton’s advisory team at Treasury; he was involved in the Asian crisis; he’s worked in a number of positions at the IMF (which is being pushed as the new global central bank). Now he’s been brought in as “Dr. Doom” (effectively co-opting bearish commentary on the market) and he’s pushing nationalizatio,n like every other establishment figure.

This is not a confidence-builder.

To return to my caveat: why set up nationalization and PPP as as an either/or alternative if they can work as complements?

Either/or is the binary switch which propagandists use to turn individuals into mobs. Scare the public and tell them, either you do this…OR you suffer that.

Either/or provokes people into instinctive responses. It makes them scared or angry. It forces them into flight (panic) or fight (anger).

It’s us or them.

We’re seeing all that now. Some very clever people are pushing those two buttons over and over.

This is one of those snakes and ladders games where you move left, and a green snake swallows you and you’re back on square one.

So you move right and a ladder takes you up four rows and then a green snake swallows you and you’re back on square one.

Solution? Stay where you are and let the snakes sort it out for themselves.

Instead of rooting around for fixes for the problem, we should be investigating the chicanery that led to it, and finding out legal ways to undo or challenge the legislation that gave us TARP etc.